Morgan Stanley revealed the introduction of a new range-based approach to its financed emissions reduction targets, introducing a new lower band to reflect the fact that the global economy and policy is not currently on track to with the ambition to limit the global temperature increase to 1.5°C above pre-industrial levels, which was the basis of its prior targets.

In a new report issued by Morgan Stanley revealing the new approach, however, the firm reiterated its commitment to its net zero goals, and noted that its new targets remain within the range of the Paris Agreement goal to limit temperature rise to well below 2°C.

In a statement provided by the firm to ESG Today, Morgan Stanley Chief Sustainability Officer Jessica Alsford said:

“We remain steadfast in our commitment to net-zero and will continue to engage with clients on climate transition strategies to help move the world to net-zero emissions by 2050.”

Morgan Stanley set a goal in 2020 to achieve net zero financed emissions by 2050 and has released a series of interim financed emissions reduction targets for several high-emissions sectors, which it updated and expanded in its new report. The firm has said previously, including in its 2023 ESG report, that its “financed emissions targets are premised on the global economy limiting warming to 1.5°C above preindustrial levels.”

In its new report, however, Morgan Stanley warns that “our clients, and our firm, may not meet net-zero-aligned targets,” driven by the fact that “current government policies, technology adoption and consumption habits are not yet aligned with the Paris Agreement’s ambition to limit the global temperature increase to 1.5°C above pre-industrial levels.”

Reflecting the current misalignment of the pace of decarbonization with a 1.5°C pathway, Morgan Stanely said that it has introduced a target range for its financed emissions reduction goals with an upper bound in line with a 1.5°C outcome, and a lower bound referencing a 1.7°C scenario, noting that the lower bound remains in line with the Paris Agreement goal to keep temperature increase well below 2°C.

In its report, Morgan Stanley also said that its targets “are designed to strike an appropriate balance between being ambitious and credible while also being realistic about present near-term global challenges.” In its discussions on key sectors, it noted some specific challenges to hitting the more ambitious climate goals, for example noting that in the automotive sector EV adoption rates are still well behind those needed to hit 2030 or 2050 net zero-aligned emissions reduction targets, while in the energy sector, challenges such as “the need to balance regional energy security from heightened geopolitical risks with the increasing global energy demand needed to support growth in developing economies” could impact the ability of the firm’s clients to reach their emissions reduction targets.

The report included updated 2030 emissions reduction targets for the Power, Energy and Auto Manufacturing sectors, as well as new targets for the Aviation, Chemicals and Mining sectors, noting that together the sectors represent around 65% of Morgan Stanley’s corporate relationship lending portfolio’s total absolute financed emissions. While the firm’s targets currently only cover corporate relationship lending, Morgan Stanley said that over time it will assess its facilitated emissions and include capital markets and event lending in its targets.

Alsford said:

“Morgan Stanley continues to work towards its ambition to achieve net-zero financed emissions by 2050. As a global financial services firm, we play an important role in helping to direct capital towards low-carbon solutions and achieve real-economy decarbonization.”

Click here to access Morgan Stanley’s 2030 Interim Financed Emissions Targets report.